Tuesday, May 11, 2010

Obama Regifts His Consciousness to Europe

A recent story related to the European bailout provides an amazing demonstration of philosophy in action. In a recent post, I discussed the idea of productionism vs. consumptionism in economics as being an expression of the more fundamental idea of the primacy of existence vs. the primacy of consciousness. In that post, I stated:

The idea that the purpose of economics is to study the problem of production or "productionism" rests on the observation that man must produce in order to survive. It recognizes that man's desire for wealth is unlimited but that he must produce that wealth. Fundamentally, this represents a recognition of reality. On the other hand, the idea of consumptionism is a total reversal. It starts with the idea that the "goods are here" and we must figure out how to "allocate" or "consume" them.

In other words, if one starts with reality as his primary frame of reference, he will soon grasp that he must produce in order to survive. However, if one starts with his own consciousness as his primary frame of reference, his focus will be on his own inner desire or wish to consume the wealth that seems to somehow exist, or perhaps, on optimal ways to allocate this magical bounty to others.

The concept of creating paper money out of thin air to pay debt is a fantastic example of this dichotomy. It is predicated on the idea that one can reverse engineer reality, i.e., create actual wealth by simulating a non-essential byproduct of the wealth creation process - the appearance of large sums of paper dollars. Kris Kayce via Not PC points out a staggering fact regarding the European bailout:

It still startles us how our Keynesian friends can’t grasp how illogical it is to just print money. Look at the number again, it’s the equivalent of A$1.1 trillion or greater than the entire yearly output of the Australian economy.

Think of it this way. It will take the European Central Bank about, ooh, a tenth of a second to create the billions of Euros needed. Yet it will take 10.9 million Australians working an average of 35 hours per week for 52 weeks to produce the same output.

With that in mind, consider this New York Times article which discusses the behind the scenes interplay between Washington and the Europeans last weekend. According to the report:

American officials became worried about the European response as early as February, a senior administration official in Washington said on Monday, when European leaders repeatedly stated that the Greece problem was well contained. They believed that mere expressions of support would be enough to calm the markets — and that they did not need to put in real commitments of emergency funds.

Right away, note the primacy of consciousness orientation of these policy makers as they discuss "expressions of support" rather than actual steps to control runaway deficits.

The Americans were less persuaded, telling their counterparts that they had to eradicate “the risk of default.” The Europeans debated this internally and, in the mind of one senior American official, who would not speak on the record, the Europeans “waited too long.”

“Had they acted sooner,” he said, “They might have gotten away with less.”

On the surface, this sounds reasonable. The Americans appear to be rejecting mere words and instead urging actual eradication of the "risk of default." How? Perhaps they demanded that Europe take steps to reign in massive budget deficits by cutting spending. Or, perhaps they demanded that the Europeans encourage the actual production of wealth by lowering taxes, repealing regulation, and lessening the stifling burden of welfare statism. So, what did the Americans really mean?

The United States officials began talking to their counterparts about an American concept: overwhelming force. “It’s all about psychology,” said the senior official. “You have to convince people that the government will get its act together.”

But it was not until Sunday, one official noted, that the meltdown spreading across Europe was regarded as “an existential threat.”

Yes, you read that right. The advice of the American government is not to "get its act together" in reality. It's advice is to "convince people that the government will get its act together" through the "overwhelming force" of psychological manipulation and the creation of phony money.

That's Obama's message - not "face reality" but "carry on with the charade"?! Carry on guaranteeing government bureaucrats cushy jobs, comfortable pensions, and whatever else it takes to stop them from rioting. Carry on spending more than you produce. All you have to do is get people to think everything is ok. In fact, according to this official, if they had implemented this charade sooner, they could have "gotten away with less" as if the sooner you implement a con, the less of a price reality will ultimately exact from you. Then, like a drunk who considers hangovers to be the real problem rather than the consumption of alcohol, this brazen attempt to flout the nature of reality was only regarded to be an "existential threat" when the markets began melting down, not when they chose to spend trillions more than they have. Finally, to conclude the farce, these courageous leaders emerged from days of rancorous debate, bruised and battered, but willing to make the "tough" call: they agreed to counterfeit a trillion dollars.

In case you were wondering, this particularly absurd species of primacy of consciousness has a name: Keynesian economics. Recall that Keynes argued that the long run effects of his policies did not matter because "in the long run, we will all be dead." Well, we are living in the long run, and it appears that the only one who is going to survive is Keynes.

5 comments:

That "in the long run we'll all be dead" snark is one of Keyne's most famous. Equally well-known is something about how practical men of action are helplessly in the grasp of the ideas of long-dead theoreticians they have never heard of.

In the first he's confessing that his ideas aren't profound, but that it doesn't matter to him. The quote suggests that his passion is for his work itself, not what it may or may not do for others. In the second, however, he's betraying a severe preoccupation with their effect upon others. Perhaps aware of their lack of actual economic value, he has chosen to take pride in their value as a political weapon (to bring a veneer of intellectual respectability to savage behavior).

The guy was a mess of contradictions.. Economically, philosophically, and psychologically.

Your statement “Then, like a drunk who considers hangovers to be the real problem rather than the consumption of alcohol.” brought to mind Paul Krugman's condescending but empty attack on the Austrian business cycle theory:

"A few weeks ago, a journalist devoted a substantial part of a profile of yours truly to my failure to pay due attention to the "Austrian theory" of the business cycle—a theory that I regard as being about as worthy of serious study as the phlogiston theory of fire. Oh well. But the incident set me thinking—not so much about that particular theory as about the general worldview behind it. Call it the overinvestment theory of recessions, or "liquidationism," or just call it the "hangover theory." It is the idea that slumps are the price we pay for booms, that the suffering the economy experiences during a recession is a necessary punishment for the excesses of the previous expansion…

Powerful as these seductions may be, they must be resisted—for the hangover theory is disastrously wrongheaded. Recessions are not necessary consequences of booms. They can and should be fought, not with austerity but with liberality—with policies that encourage people to spend more, not less. Nor is this merely an academic argument: The hangover theory can do real harm."

Krugman, as so many other Keynesians, see the goods and never ask "how did they get here" but simply lump all production into the same phenomenon. Without understanding the misallocation of capital due to a counterfeit "stimulus" his response to the hangover is the hair of the dog that bit you."

Krugman is exhibit A for the primacy of consciousness orientation. He fails to grasp the simple relationship between wealth and production. The "fight" against recession that he describes is in essence, a fight against the nature of reality. It is the attempt to literally bring a wish into existence - a wish that the government can wave a magic wand and create wealth by stamping more zeroes on pieces of paper.

I think that religion, Keynesian economics or any primacy of consciousness philosophy must be psychologically comforting on some level in order for a mind to hold such a brazen contradiction of reality. It is the idea that one literally can control the laws of nature. In Keynesian economics, the all knowing policy maker or central banker plays the role of God or the Wizard of Oz, always a step ahead, able to pull certain levers to manipulate the world.

Quote of the Month

“We are fast approaching the stage of the ultimate inversion: the stage where the government is free to do anything it pleases, while the citizens may act only by permission; which is the stage of the darkest periods of human history, the stage of rule by brute force.” -- Ayn Rand